Introduction

Economic sanction’ has become the buzzword in the analysis of North Korea’s external trade for 2016 and 2017. The primary focus has been placed on how much impact the sanctions have had and will have on North Korea-China trade, which takes the lion’s share of the former’s external trade. Available data on the goods trade between the two countries from January to November 2016 shows that North Korea’s imports from China rose 8.6 percent year-on-year and its exports to China went up 2.8 percent; these growths are used to support the claim that sanctions have been ineffective. Specifically, after the UN Security Council (UNSC) adopted Resolution (UNSCR) 2270 (March 2, 2016), and China’s commerce ministry announced its decision to ‘sincerely implement’ the resolution (April 5, 2016), North Korea’s exports to China in April to July (2016) tumbled from the year before. However, in August 2016, exports began rising again immediately following the decision to deploy the Terminal High Altitude Area Defense system (THAAD) to South Korea. The upward trend continued into October and November, after the fifth nuclear test on September 9, 2016. Indeed, these series of events are making skeptical views that the sanctions could be, in fact, heavily affected by the political dynamics in Northeast Asia, particularly that on the Korean peninsula.

Nevertheless, it is too premature to conclude that the sanctions are ineffective for several reasons. First, there was a decline in North Korea-China trade in 2016, in both exports and imports compared to 2014, but not 2015. This means that assessments of the effectiveness of sanctions may generate different results depending on the point of comparison. Second, the effects of sanctions can be accurately assessed when both tradable and non-tradable goods are considered from the perspective of the supply and demand of foreign currency. However, any credible data on these accounts are not available at this point. Third, in light of the UNSCR 2321 (November 30, 2016) which set a ceiling on North Korea’s anthracite exports at US$400 million or 7.5 million tons a year, the country’s exports to China will likely plunge in 2017. Finally, assessments need to consider the effects on not only the external economy but also on the internal economy. Specifically, it should comprehensively consider the effects of reduced imports on the country’s production activities and reduced foreign currency inflow on market activities. However, such studies are yet to be conducted.

With all of this in mind, this study attempts to assess North Korea’s external trade in 2016 and present the prospects for 2017. The analysis does not cover all segments of external trade and is limited to North Korea-China trade. This is because the bilateral trade is the only segment that offers data (January-November) on North Korea’s external trade in 2016 at this point. Even so, a major distortion in the data is unlikely since North Korea’s external trade is heavily dependent on China. Accordingly, the following sections first examine the overall North Korea-China trade and then by Chinese province/city and North Korea’s major export and import items. This is followed by a brief analysis on the effects of UNSCR 2321 on the external and internal fronts of the North Korean economy in regard to the supply and demand of foreign currency.

* This article is part of 2016 The DPRK Economic Outlook

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